SoWashCo’s LTFM Construction Fund Is Nearly $12 Million Ahead of Plan. What Is the Money For?

The Key Takeaway

The school district sells bonds to pay for Long-Term Facilities Maintenance (LTFM) construction projects. South Washington County Schools entered fiscal year 2026 with approximately $7.2 million more in its LTFM construction account than it had projected one year earlier, but it sold essentially the full planned principal amount of facilities-maintenance bonds anyway.

The March 2026 bond sale then deposited approximately $4.7 million more into the construction fund than the prior LTFM plan anticipated, largely because the bonds were sold at a premium. That premium was not entirely unexpected. Before receiving bids, the district’s presale materials had already projected approximately $2.8 million of premium proceeds.

Planned FY26 expenditures did not increase. Together, these changes left the LTFM construction fund approximately $11.9 million ahead of the previous forecast.

The district’s updated ten-year plan does not identify additional projects that would use most of this money. Instead, the higher balance remains throughout the projection while the district anticipates another $101 million of future borrowing.

This does not suggest that LTFM funds can be redirected to ordinary operating expenses. They cannot (they are restricted capital resources). It does raise a different question: Is the district’s borrowing plan aligned with its identified facility needs and the major facility decisions now being considered through its five-year planning process?

What Is LTFM?

Long-Term Facilities Maintenance, commonly called LTFM, is a state-authorized program that allows school districts to raise money for qualifying health, safety, and deferred-maintenance work.

Allowable projects can include:

Heating, cooling, and ventilation systems
Roofs and building envelopes
Electrical and plumbing systems
Interior surfaces
Parking lots and other site improvements
Health and safety work

LTFM revenue is restricted to qualifying purposes. Money raised for these projects cannot simply be redirected to classroom staffing or other unrestricted General Fund expenses.

Each year, the School Board must approve a ten-year LTFM plan showing anticipated expenditures and how those projects will be financed.

What the District Expected in 2025

In July 2025, the School Board approved its FY27 LTFM ten-year plan and authorized the sale of facilities-maintenance bonds.

For FY26, the plan projected the following activity in Fund 06, the district’s Building Construction Fund:

FY26 Fund 06 projection	July 2025 plan
Beginning balance	$22,911,688
Bonded revenue	$30,395,000
Planned expenditures	$15,426,890
Projected ending balance	$37,879,798

The plan therefore already anticipated that the district would finish FY26 with approximately $37.9 million remaining for future LTFM work.

The School Board approved both the ten-year plan and the authorization for the Series 2026A bond sale at its July 17, 2025 business meeting.

What Changed by June 2026?

The LTFM plan approved in June 2026 showed a substantially different starting position:

FY26 Fund 06 activity	July 2025 projection	June 2026 update	Change
Beginning balance	$22,911,688	$30,089,591	+$7,177,903
Bond proceeds deposited	$30,395,000	$35,089,177	+$4,694,177
Planned expenditures	$15,426,890	$15,426,890	$0
Ending balance	$37,879,798	$49,751,878	+$11,872,080

The higher beginning balance could have resulted from projects being delayed, projects costing less than expected, higher investment earnings, or some combination of factors.

What is notable is what happened next.

Despite entering the year approximately $7.2 million ahead of plan, the district deposited approximately $4.7 million more from the bond sale than its earlier LTFM plan anticipated. It did not increase planned FY26 expenditures.

The result was an ending balance approximately $11.9 million above the prior forecast.

The district’s separate 2026–27 budget shows an even slightly higher projected LTFM construction balance because it includes additional investment earnings. That budget projects approximately $50.5 million at the end of FY26 and $31.2 million at the end of FY27.

Did the District Borrow an Extra $4.7 Million?

Not exactly.

The facilities-maintenance portion of the Series 2026A bond sale had a principal amount of $30,595,000. That was only about $200,000 above the $30.395 million of bonded revenue shown in the previous LTFM projection.

Most of the additional proceeds came from a bond premium.

According to the district’s official bond sale report, the facilities-maintenance portion generated:

Source	Amount
Bond principal	$30,595,000
Reoffering premium	$4,672,940
Estimated investment earnings	$304,161
Total sources before issuance costs	$35,572,101
Initial construction-fund deposit	$35,089,027

A bond premium occurs when investors pay more than the face value of a bond, generally because its stated coupon rate is higher than the market yield. The district receives more cash upfront while making the scheduled principal and interest payments over time.

Importantly, the premium was not just a surprise produced on the day of the sale. The district’s preliminary official statement had already projected approximately $2.84 million of premium on the facilities-maintenance portion. After estimated issuance costs, the presale documents anticipated depositing approximately $33.15 million into the construction fund, about $2.76 million more than the $30.395 million of bonded revenue shown in the July 2025 LTFM plan.

The winning bid produced an even larger premium, increasing the final construction-fund deposit to approximately $35.09 million.

The premium therefore was not free money, but it also was not an additional $4.7 million of bond principal. The more precise question is why the district retained the additional premium as project funding when it already had a significantly better beginning balance and had not increased planned expenditures.

The bond terms also reserved the district’s right to increase or decrease principal on the day of the sale in $5,000 increments. The district exercised that authority by reducing the two refunding portions by a combined $2.02 million after the winning bid produced a larger-than-expected premium. However, it left the new-money facilities-maintenance principal unchanged at $30.595 million.

The treatment of the refunding portions is not perfectly comparable because the amount needed to retire the old bonds was fixed. A larger premium naturally reduced the principal required for that purpose. The sale report states that, for the new-money facilities-maintenance portion, the premium was instead retained in the construction fund for project costs.

This does not establish that the facilities-maintenance portion could have been reduced without any legal, tax, or debt-structuring constraints. It does establish that substantial premium proceeds were anticipated before the sale, that the district retained authority to resize the issue, and that the additional facilities funding was preserved rather than used to reduce principal. The published materials do not explain why.

Was the Extra Money Used Later?

The updated ten-year plan does not appear to draw down most of the additional balance.

Fund 06 ending balance	2025 projection	2026 projection	Difference
FY26	$37.9 million	$49.8 million	+$11.9 million
FY27	$17.9 million	$29.8 million	+$11.9 million
FY28	$37.6 million	$49.7 million	+$12.1 million
FY29	$22.2 million	$34.4 million	+$12.1 million
FY30	$32.5 million	$44.6 million	+$12.1 million
FY31	$19.5 million	$31.6 million	+$12.1 million
FY32	$31.5 million	$41.6 million	+$10.1 million
FY33	$19.5 million	$29.6 million	+$10.1 million
FY34	$31.5 million	$43.6 million	+$12.1 million
FY35	$19.5 million	$31.6 million	+$12.1 million

Some individual assumptions change, including the timing of future bonds and expenditures. But the district’s own projection still shows approximately $12.1 million more in Fund 06 at the end of FY35 than the previous plan did.

This is important because it suggests the additional proceeds are not merely covering a temporary project delay. Most of the favorable balance remains embedded in the fund throughout the forecast.

Another $101 Million of Borrowing Is Still Projected

The June 2026 plan anticipates four additional Fund 06 bond issues:

Fiscal year	Projected bonded revenue
FY28	$30,095,000
FY30	$25,000,000
FY32	$22,000,000
FY34	$24,000,000
Total	$101,095,000

Maintaining a construction-fund balance between bond issues can be reasonable. Projects occur over multiple years, and districts need cash available to pay contractors as work proceeds.

But the plan never draws Fund 06 close to zero. Even after accounting for future work, it projects ending balances between approximately $19.6 million and $49.7 million.

That does not prove the district has borrowed unnecessarily. It does mean the public should be able to see what level of working capital the district intends to maintain, why that amount is necessary, and how existing cash affects the size of future bond issues.

How Does This Connect to the Five-Year Plan?

The district is simultaneously developing a five-year plan expected to consider enrollment, building utilization, program delivery, and the district’s facility footprint.

That process could result in:

Consolidating or closing underutilized buildings
Moving students or programs between facilities
Renovating retained buildings to accommodate more students
Repurposing vacated buildings
Reducing the number of facilities the district must maintain

Those decisions could create legitimate capital needs. Maintaining some financial flexibility while the district evaluates its facility portfolio may therefore be prudent.

But the approved LTFM plan does not identify the additional Fund 06 balance as funding for five-year-plan implementation. It does not add corresponding expenditures, identify projects associated with consolidation, or explain how future borrowing will change after facility decisions are made.

The timing also matters. The district raised these funds before determining which buildings it expects to operate over the long term.

Major LTFM projects can include long-lived improvements such as roofs, mechanical plants, electrical systems, and interior renovations. The district published site-level project lists for FY26–27 and FY27–28, but not for the remaining years of the ten-year projection. Those two lists also do not explain which projects, if any, require the approximately $11.9 million of additional Fund 06 resources.

A smaller facility footprint could eventually reduce long-term maintenance needs. It could also require significant upfront spending to consolidate programs and prepare retained buildings. Either outcome should be reflected in an integrated capital plan.

What the Documents Do and Do Not Show

The available documents show that:

Fund 06 began FY26 approximately $7.2 million ahead of the prior projection.
The presale materials set the facilities-maintenance principal at $30.595 million and already anticipated approximately $2.84 million of premium.
Before bids were received, the district therefore expected an approximately $33.15 million construction-fund deposit, about $2.76 million more than the bonded revenue shown in the July 2025 LTFM plan.
The winning bid produced an even larger premium and an approximately $35.09 million construction-fund deposit.
The bond terms allowed principal adjustments on the day of sale.
The district reduced the two refunding portions by a combined $2.02 million but maintained the facilities-maintenance principal at $30.595 million.
Planned FY26 expenditures remained unchanged.
Fund 06 ended FY26 approximately $11.9 million ahead of the prior forecast.
Most of that difference remains throughout the ten-year projection.
The district still anticipates approximately $101 million of additional Fund 06 bond proceeds.

The documents do not show:

That the money was spent improperly
That the district violated bond or LTFM requirements
That the competitive bond sale itself received an unfavorable interest rate
Why the facilities-maintenance principal was set at $30.595 million despite the improved Fund 06 position and the premium already anticipated
Why the facilities-maintenance portion remained unchanged after the winning bid produced an even larger premium
Whether legal, tax, or debt-structuring constraints prevented that portion from being reduced
Which additional project costs justify retaining the premium proceeds
Whether any of the additional balance is being reserved for five-year-plan implementation
Why approximately $12 million of additional Fund 06 balance persists throughout most of the ten-year forecast

Those missing explanations are why additional disclosure is warranted.

Questions the District Should Answer

Why did Fund 06 enter FY26 approximately $7.2 million ahead of the amount projected in the July 2025 LTFM plan?
What specific project costs justified retaining approximately $4.7 million in additional proceeds from the Series 2026A bond sale?
Why was the facilities-maintenance principal set at $30.595 million when the presale materials already anticipated approximately $2.8 million of premium and Fund 06 was ahead of its previous forecast?
After the winning bid produced an even larger premium, why were the refunding portions resized while the facilities-maintenance portion remained unchanged? Were there legal or financial constraints on reducing that portion, or was retaining the additional project funding an intentional decision?
Is any portion of the additional Fund 06 balance reserved for specific projects arising from the five-year plan?
If the additional proceeds are intended for future projects, where are those projects and their estimated costs identified?
What minimum Fund 06 balance does the district consider necessary between bond issues, and how was that target established?
Why does approximately $12 million of additional fund balance remain through FY35 instead of reducing future borrowing?
How will the district prevent major long-lived investments in facilities that may soon be closed, consolidated, sold, or substantially repurposed?
When will the district publish a site-by-site LTFM project schedule that allows the public to evaluate whether capital investments align with the future facility plan?
Will the district update its LTFM spending and borrowing projections after the five-year plan determines which facilities will remain in service?

Why This Matters

The question is not whether restricted construction money should be used for unrelated operating expenses. It cannot be.

The question is whether the district raised the appropriate amount of capital, at the appropriate time, for clearly identified facility needs.

Carrying additional cash may ultimately prove to be a prudent decision. The five-year plan may identify renovations, consolidations, or other eligible work that requires the money. Future bond issues may also be reduced once those plans are finalized.

But the documents currently available to the public do not establish that connection.

When a district carries tens of millions of dollars in construction funds, retains nearly $12 million more than previously projected, and anticipates another $101 million of borrowing, the community should be able to see what the money is for and how the borrowing plan supports the district’s future facility strategy.

That explanation is especially important before the district makes major decisions about which schools it will continue to operate.

FY27 plan approved July 17, 2025

The complete packet contains the administrative report, expenditure application, revenue projection, FY26 and FY27 project lists, resolution, and minutes extract.